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[SOLVED] Shaun  suggests that there wasn’t enough

[SOLVED] Shaun  suggests that there wasn’t enough time in the experiment.  He estimates that in the second month, June, the Really Annoying Company will have 36,000 deliveries at $9.00.  Please answer the following assuming that Shaun  is correct.  You want to get an idea of what will happen to profits before you commit to an action. If profits go up assuming that Shaun is correct, then you will keep the current price of $9.00 during June. If the profits go down, you plan to return to $10 per delivery.

  1. What would be the Price Elasticity of Demand if Shaun is correct?
  2. Is elasticity elastic, inelastic or neither?
  3. What does this mean and why does it matter?
  4. Will Revenues increase or decrease as a result of the price cut to $9.00 at 36,000 deliveries?  By How much?
  5. Beatrice has calculated the fixed costs for the Really Annoying are $15,000 per month and each delivery costs $5.50.  Will profits go up or down as a result of the price cut if Really Annoying has 36,000 deliveries?  By How much?



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honeyd


21-09-20 | 15:13:01

a. What would be the Price Elasticity of Demand if Shaun is correct?
(36,000-31,000) / 31,000 = 16.13%
(9-10)/10 = 10%
16.13%/10% = 1.613
b. Is elasticity elastic, inelastic or neither?
Because the elasticity is above 1, this is

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